Markets in Everything: Panhandling

In Memphis, a local FOX News reporter, Jason Carter, donned old
clothes and hit the streets earlier this year, earning about $10 an
hour. “Just the quasi-appearance of being homeless filled my cup,”
Carter observed. That all the money is beyond the tax man’s clutches
adds to the allure of professional panhandling.

Carter prepared for his stint on the street by surfing the Internet,
where a variety of websites dispense panhandling advice. NeedCom, for
example–subtitled “Market Research for Panhandlers”–offers tips from
Baker and other pros on how to hustle. The website’s developer, Cathy
Davies, wants it to get people “thinking about panhandling as a
realistic economic activity, rather than thinking that panhandlers are
lazy or don’t work very hard.”

More here, overly sensationalistic but interesting in parts.

Thanks to Tim Groseclose for the pointer.


Ironman: a reporter for one of the Toronto papers did the same thing about ten years ago, and discovered that the panhandling "business" there is run by a sort of mafia that controls who can panhandle where, and to which panhandlers have to pay a "tax", or protection fee. The reporter found that many beggars made in excess of $100 per day, and actually lived in nice houses in the suburbs.

Hence, I never give a penny to a panhandler. I never did before I read that article, but after reading it, I stopped feeling bad about not giving money to beggars. Then I became a heartless economist, and became proud of not giving money to panhandlers.

If you can earn $10 an hour as compared to $5.85 at the minimum wage what does this do to the argument that the minimum wage cost people employment. This makes it look like the reason minimum wage employment is falling is that individuals have much better opportunities.

spencer: You're a bit behind - as of 24 July 2008, the federal minimum wage is now $6.55 per hour.

As for minimum wage employment falling, that has a lot to do with teenagers being driven out of the job market as a response to the increase, which is important since they used to make up over 25% of those who earned minimum wage. Those Age 16-19 now have the double whammy of fewer available jobs (represented by a shrinking workforce in that age range) and a higher rate of unemployment as well.

It's funny - back in July 2007, when the federal minimum wage was increased to $5.85 from $5.15 per hour, the shift that occurred from July 2007 to August 2007 was like seeing someone throw a switch. Especially remarkable in that economic growth from July 2007 through September 2007 clocked in at 4.8% (according to the recently revised figures.)

It will be interesting to see if something similar happens again with the latest increase.

what about Bum fights?

In the late 90s I heard from a quite trustworthy friend that she knew a panhandler in Seattle's U District who did $60,000 a year from his wheelchair. It supported his wife and two kids.

Panhandlers do indeed provide a valuable product -- guilt absolution. Why should we dis their living any more than we do, say, crafters of hand-made Buddhist prayer books?

There was a comedy from a Hong Kong Studio about a decade ago about panhandling turf wars.

For an interesting story about this sort of thing, be sure to read about Sherlock Holmes and "The Man with the Twisted Lip" by Sir Arthur Conan Doyle.

Why does a business with such low barriers to entry pay so well? Why hasn't the excess return been competed away?


But Ironman teenage employment contracted in the same way last economic downturn when there was no increase in the minimum wage. Out of the last 8 years teen employment fell in 6 of those years. So if the minimum wage is responsible for the recent drops in teen employment what caused the almost identical drops in earlier years when the minimum wage was not changed? You can not have it both ways.

This is not a new notion. In Adam Smith's the Wealth of Nations he states that:

Nobody but a beggar chuses to depend chiefly upon the benevolence of his fellow-citizens. Even a beggar does not depend upon it entirely. The charity of well-disposed people, indeed, supplies him with the whole fund of his subsistence. But though this principle ultimately provides him with all the necessaries of life which he has occasion for, it neither does nor can provide him with them as he has occasion for them. The greater part of his occasional wants are supplied in the same manner as those of other people, by treaty, by barter, and by purchase. With the money which one man gives him he purchases food. The old cloaths which another bestows upon him he exchanges for other old cloaths which suit him better, or for lodging, or for food, or for money, with which he can buy either food, cloaths, or lodging, as he has occasion. (B.I, Ch.2, Of the Principle which gives Occasion to the Division of Labour in paragraph I.2.2)

And it is through this and other references to the "beggar" that Smith calls our attention to the fact that they are just as much a part of the economy as anyone else. He also here foreshadows the future role of charity as an economic factor.


"panhandling as a realistic economic activity, rather than thinking that panhandlers are lazy or don’t work very hard"

Yes! I tried to convince my daughter of this. Think about it: pick your own hours, no boss, drink at work if you want (might even raise your pay), outdoor work, leave when you want, decent pay, but terrible retirement and health plan (unless of course you ride a bike to work). You're basically a karma salesman.

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